Pre-launch token trading has become increasingly popular among cryptocurrency investors, despite the fact that it can introduce up to 20 times more price volatility compared to post-token launch trading.
Before the token generation event (TGE), the W token from Wormhole experienced over 3,000% volatility, while the JUP token from Jupiter saw volatility rise to around 2,800%. However, one week after the coin was launched, the volatility dropped significantly to around 100% for W and 150% for JUP, according to a report from Keyrock.
Understanding the impact of market liquidity on a token’s volatility could help traders make more informed decisions. The report highlights that the lack of liquidity in pre-launch markets eliminates the price discovery phase, which is when an asset’s price is determined through natural buyer and seller activity.
Despite the lack of liquidity and increased volatility, pre-launch trading continues to be a growing trend among risk-taking investors who want to be among the first to invest in new crypto projects in the hopes of higher returns. Many large investors, or whales, participate in pre-launch buying due to the fear of missing out (FOMO) on a potentially lucrative investment, often leading to higher prices. However, the report notes that most pre-launch markets are unprofitable for buyers due to the heightened volatility.
Despite the initial volatility, over 95% of pre-token investors in ENA and PIXEL tokens are currently profitable, showcasing the potential of pre-launch investing. The ENA token has seen a 14% increase since launch, while the PIXEL token is down 31% since its TGE, according to CoinMarketCap data.
However, not all token launches have been successful. More than 60% of pre-token investors in PORTAL have experienced losses, with the token down over 82% since its launch in February.
Despite a recent system-wide outage, Coinbase has recovered, although user withdrawals are still offline.